Mar 19, 2018 - There are, however, some key differences between the two frameworks. First, the DPA framework under the C
LEGISLATION UPDATE 10 April 2018
WHAT DEFERRED PROSECUTION AGREEMENTS MEAN FOR YOU The Criminal Justice Reform Bill (“CJRB”) was passed by Parliament on 19 March 2018. The CJRB introduces a framework for deferred prosecution agreements (“DPAs”) in Singapore. You may read about the DPA regime here. This update analyses certain features of the DPA framework in Singapore, and discusses what companies can do and should do now that DPAs have reached our shores.
review and revise its internal policies and processes to prevent future lapses. Second, DPAs may contain terms which require the accused company to cooperate with investigations relating to the alleged offence covered by the DPA, or other related offences committed by the accused company’s key personnel. At the Second Reading of the CJRB, Senior Minister of State for Law Indranee Rajah (“SMS Indranee”) noted that the DPA framework “gives Prosecutors another tool to more effectively deal with corporate offending”, which “is particularly useful where prosecution of a corporate offender unnecessarily punishes not just the management, but also the employees and shareholders of the corporate entity for what might be the acts of a small number of employees or officers of the company”. Apart from these purposes, there are other potential advantages to establishing a DPA framework in Singapore: (a)
DPAs could potentially allow corporate offenders to be penalised much more severely than they can be under the current law. For example, under its DPA with the US Department of Justice, Keppel Offshore & Marine agreed to pay fines totalling more than US$422 million, to be allocated between the US, Brazil, and Singapore. If it had been charged for corruption under the Prevention of Corruption Act, it would have been liable on conviction to a maximum fine of S$100,000 per charge;
(b)
the use of DPAs will likely save time and costs for both the prosecuting agency and the accused company, by avoiding trials, for which the outcomes may be uncertain; and
(c)
DPAs may provide for compensation to the victims of the alleged offence, thereby allowing them to achieve an earlier resolution to their claims without the need to start proceedings.
THE USE OF DPAS GLOBALLY DPAs have been commonly used in the United States of America (“US”) and the United Kingdom (“UK”). Recently, Keppel Offshore & Marine entered into a DPA with the US Department of Justice in the wake of a global corruption scandal. Elsewhere, French authorities published their first DPA (ie a convention judiciaire d’intérêt public) in November 2017, with HSBC Private Bank Suisse SA, and a bill is presently before the Australian Parliament to introduce a DPA scheme there.
THE ADVANTAGES OF ESTABLISHING THE DPA FRAMEWORK IN SINGAPORE On 28 February 2018, the Ministry of Law stated that DPAs serve two main purposes: “[e]ncourage corporate reform, to prevent future offending” and “[f]acilitate investigation into wrongdoing, both by the company and by individuals”. First, DPAs may reduce the possibility of reoffending by the accused company as they may impose obligations on the accused company to
THE DPA FRAMEWORK IN SINGAPORE UNDER THE CJRB (i)
Comparison with framework in the UK
the
DPA
The DPA framework in Singapore bears many similarities to the DPA framework in the UK in the way that both frameworks are structured. Among other things, under both the Singapore and the UK frameworks, DPAs which are agreed between parties must be approved by the court, which will do so only if the DPA is in the interests of justice, and the terms of the DPA are fair, reasonable and proportionate. There are, however, some key differences between the two frameworks. First, the DPA framework under the CJRB provides for less judicial involvement as compared to the DPA framework in the UK. Under the UK framework, the prosecutor must apply to the Crown Court after negotiations with the accused company have commenced, but before the terms of the DPA are agreed, for a declaration that entering into a DPA with the company is likely to be in the interests of justice, and that the proposed terms of the DPA are fair, reasonable and proportionate (“Preliminary Hearing”). When the terms of the DPA have been agreed, the prosecutor must again apply to the Crown Court for a declaration that the DPA is in the interests of justice, and that the terms of the DPA are fair, reasonable and proportionate. While the DPA is in force, if the prosecutor believes that the accused company has failed to comply with the terms of the DPA, the prosecution may make an application to the Crown Court. Thereafter, if the Crown Court finds that the company has failed to comply with the terms of the DPA, it may either invite the prosecutor and the company to agree proposals to remedy the failure to comply, or terminate the DPA. In contrast, under the DPA framework in Singapore, there is no provision for a Preliminary Hearing or its equivalent. The Public Prosecutor’s (“PP”) first application to the High Court under the said framework is when parties have agreed on the terms of the DPA. While the DPA framework in the UK has the advantage of providing for judicial supervision on
the issue of whether the DPA process should apply at all in a given case, this same issue can be dealt with in Singapore by the publication of a set of guidelines relating to the DPA process, including the factors which the PP may take into account when deciding whether or not to enter into a DPA. In the UK, a DPA Code of Practice, jointly issued by the Serious Fraud Office and the Crown Prosecution Service, sets out guidelines relating to, among other things, factors that the prosecutor may consider when deciding whether to enter into a DPA, the terms of a DPA itself, and how alleged breaches are dealt with by the prosecutor. However, at the Second Reading of the CJRB, SMS Indranee confirmed that a similar Code of Practice will not be published, following the general position in Singapore that prosecutorial guidelines are not published so that they “do not become a tool for criminals to refer to in manipulating the criminal justice system to escape punishment”. Second, the options which the court has at its disposal where the terms of a DPA are found to have been breached differ as between the DPA framework in Singapore, and the DPA framework in the UK. Under the DPA framework in Singapore, where the PP applies to the High Court in respect of any alleged non-compliance by the company with the terms of the DPA, there is no requirement that the breach must be material before the High Court must terminate the DPA. As such, it would appear that trivial, inadvertent breaches may be exempted only by way of prosecutorial discretion. In contrast, under the DPA framework in the UK, if the Crown Court finds that the terms of the DPA have been breached, it may as an alternative to terminating the DPA, invite the parties to the DPA to agree proposals to remedy the failure to comply. This less draconian option may be especially appropriate in the case of minor, inadvertent breaches. In light of the DPA framework under the CJRB, it is submitted that where the PP believes that the DPA has been breached (especially in the case of minor, unintentional breaches), it should notify the company and provide it with an opportunity to rectify the same, so that unnecessary terminations can be avoided, while any breaches can still be dealt with effectively.
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(ii)
Stakeholders and the DPA process
The CJRB does not expressly provide for the involvement of parties other than the company and the PP in the DPA process. At the Second Reading of the CJRB, SMS Indranee clarified that, as a general principle, “a company’s decisionmaking power lies with its board”, and that “[o]ther stakeholders, such as shareholders, do not have the same power”. This is because while “the board and the directors [owe] a fiduciary duty” to the company, “[s]hareholders are free to act in their own interests”. SMS Indranee further noted that if the shareholders have issues with the decisions made by the company and its board, “they have other avenues available to them, such as the General Meeting, and … the other rights available to shareholders under the Companies Act”. Apart from shareholders, other stakeholders such as the victims of the alleged offence similarly do not have an express right under the CJRB to be involved in the DPA process. That being said, the CJRB expressly states that one of the terms that a DPA may impose on the company is the requirement to compensate the said victims of the alleged offence. In this way, it is likely that the victims’ interests will be considered by the PP in the course of negotiations for a DPA.
(iii)
Application for the approval of DPAs must be heard in camera
Under the DPA framework in Singapore, an application for the approval of a DPA by the High Court must be heard and dealt with in camera. According to SMS Indranee, this is because “if a DPA approval proceedings was held in the public view, and if the DPA did not eventually come into force, the company negotiating the DPA … could be prejudiced, in any future criminal proceedings based on the same facts”. Accordingly, if companies have misgivings that by entering into negotiations for a DPA, this could prejudice their defence in subsequent criminal proceedings if the DPA ultimately does not come into force, they will likely be more reluctant to cooperate with investigations or offer up information freely from the outset. This is consistent with the position under the DPA framework in Singapore that any material that shows that the company entered into negotiations for a DPA (including, in particular, any draft of the
DPA, any draft of a statement of facts intended to be included within the DPA, and any statement indicating that the company entered into such negotiations), and any material that was created solely for the purpose of preparing the DPA or statement of facts, may only be used in evidence against the company under specific and narrow circumstances.
(iv)
DPAs in comparison with applicable penalties for corporate offenders
It is also observed that, as much as DPAs allow companies to avoid lengthy, expensive trials and the associated uncertainty, there may be little incentive for a company to agree to a DPA under which it may be obliged to pay a financial penalty that is many orders of magnitude higher than the maximum fine for the relevant offence. A comprehensive review of the applicable penalties for corporate offenders in Singapore should be undertaken, and revised upwards as necessary.
WHAT COMPANIES SHOULD DO Companies should review and strengthen internal policies and processes to minimise the possibility of breaches, and to ensure the early identification of any breaches. As DPAs will only be made available to subjects that are represented by counsel under the DPA framework in Singapore, companies should seek legal advice immediately once a breach has been identified. SMS Indranee clarified at the Second Reading of the CJRB that counsel must be an advocate and solicitor lawfully entitled to practise criminal law in Singapore. Nevertheless, in-house counsel not falling within this category may still participate in the process of negotiating a DPA. After a breach is identified, the company should work with counsel to conduct internal investigations to determine the cause of the breach and the key personnel involved, as well as make preparations to notify the relevant regulatory authority. Early notification by the company is likely to be viewed favourably by the regulatory authority, and subsequently the PP, when they exercise their discretion whether and on what terms to enter into a DPA with the company. In addition, counsel can also assist to propose new compliance programmes or enhancements to existing compliance programmes. These steps 3
may be helpful for the purposes of negotiating a DPA with the PP, and may thereafter be incorporated into the terms of a DPA. As the provision of inaccurate, misleading or incomplete information to the PP during the course of negotiations for the DPA may expose the company to a prosecution for the alleged offence and/or or subsequent criminal proceedings for providing inaccurate, misleading or incomplete information, any and all documents evidencing and relating to the breach should be immediately identified, preserved and reviewed. This will enable the company to apprise itself of the full facts and minimise the risk of giving inaccurate, misleading or incomplete information to the relevant authorities. All members of staff should be briefed thoroughly and expressly instructed not to compromise or destroy any documents. Thereafter, they should be monitored closely to ensure compliance with these directions. Further, given that material and information obtained by the PP in the course of negotiations for a DPA may be used against the company in any criminal proceedings relating to any offence, it is imperative that the company be fully transparent and upfront with counsel from the outset so that counsel may advise the company appropriately. When a DPA is in force, the company must ensure absolute compliance by all staff with all terms of the DPA, and consult with counsel when in doubt. This must be strictly observed because the DPA framework in Singapore does not require that any non-compliance with the said terms must be material in order for the PP to apply to the High Court to terminate the DPA. Once the DPA is terminated, the company will likely be prosecuted for the alleged offence. ________________________________________ The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances. Copyright in this publication is owned by Drew & Napier LLC. This publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval.
If you have any questions or comments on this article, please contact:
Gary Low Director, Dispute Resolution T: +65 6531 2497 E:
[email protected]
Vikram Ranjan Ramasamy Associate Director, Dispute Resolution T: +65 6531 2408 E:
[email protected]
Yap Zhan Ming Associate, Dispute Resolution T: +65 6531 2491 E:
[email protected]
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